Ok this might be a dumb question, but here I go anyway.
My broker the big "O", widens spreads to about 10pips on majors 5min before a news release. Regularly the spread is about 1pip on EUR/USD.
So.....isn't there a arbitrage opportunity?
If in my primary account, I take the bid price, and in my subaccount I take the ask price, then after all the volatility is gone, and the spreads reduce from 10 to 1, wouldn't there be about a combined 8 or 9pip profit?
In my mind this is the same as merger arb except there is no real risk of the merger(spread reduction) not happening.
Isn't this the same as buying a product for less and selling for more?
If I'm missing the point, I would appreciate someone's insight.
Ben
My broker the big "O", widens spreads to about 10pips on majors 5min before a news release. Regularly the spread is about 1pip on EUR/USD.
So.....isn't there a arbitrage opportunity?
If in my primary account, I take the bid price, and in my subaccount I take the ask price, then after all the volatility is gone, and the spreads reduce from 10 to 1, wouldn't there be about a combined 8 or 9pip profit?
In my mind this is the same as merger arb except there is no real risk of the merger(spread reduction) not happening.
Isn't this the same as buying a product for less and selling for more?
If I'm missing the point, I would appreciate someone's insight.
Ben
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